TAX reforms aimed at putting more money in the hip pockets of the country's battlers form the backbone of the Labor Government's first Budget.

Treasurer Wayne Swan has unveiled a $55 billion working families tax package, including tax cuts of $46.7 billion over four years and incentives to get parents back into the workforce.

The people who benefit most are average wage earners. Someone on $40,000 gets over $20 a week extra, while someone earning $80,000 or more gets just over $21. Workers in the brackets between $60,000 and $80,000 – who include young professionals – get as little as $12.

However, mums and dads also get a windfall from more child care benefits, tax refunds on school costs, and a change to Medicare fees.

Average wage earners may win this year, but the four-year plan is worth over $46 billion and higher earners will see their tax rates slashed over the next two years.

Tax rate changes

The Government will push through huge tax cuts in reforms that Mr Swan called the most comprehensive changes to the tax system since World War II.

From July 1 the 30 per cent tax threshold will rise from $30,001 to $34,001, the 40 per cent threshold will rise from $75,001 to $80,001 and the 45 per cent threshold will increase from $150,001 to $180,001.

What that means for you

From July 1, the tax cuts will provide families on a single income of $40,000 with an extra $20.19 a week – a 16.8 per cent reduction in tax.

Families on a single income of $80,000 will get tax cuts of $21.15 a week – a tax reduction of 5.8 per cent. Families on a combined income of $100,000 will get an extra $31.73 per week – an 8.8 per cent tax cut.

Get back to work, Mum

The Government is keen to encourage mums back into the workforce and is pushing reforms aimed at making childcare more affordable as well as lowering taxes for part-time workers.

A hike in the low-income tax offset means part-time workers will pay less tax on their earnings. From July 1, a part-time worker will be able to earn up to $14,000 without paying tax – up from $11,000 currently.

By 2010/2011 the Government says a typical second income earner will be able to work 14 hours a week without paying tax.

The Government estimates the tax cuts will encourage around 65,000 new workers into the work force, adding about 2.5 million hours of work each week.

Child care help

High child care costs are a huge negative when it comes to parents thinking about returning to the workforce.

To help ease the burden, the child care tax rebate will increase from 30 per cent to 50 per cent of out-of-pocket costs.

The rebates will be paid quarterly, not annually so parents have the access to the money closer to when the bills roll in. The maximum amount payable will rise from $4354 per child to $7500 per child.

Single-parent families, or families where parents are both working full-time, will also be eligible for up to 50 hours of child care benefits a week.

A couple with two children and one partner earning $60,000 a year and the other $27,000 a year will receive more than $12,400 in child care assistance.

This will cover around 70 per cent of their child care costs - $2000 a year more than they would currently get.

Means testing the baby

High income earners will no longer be eligible for the baby bonus.

“The Government does not believe hard earned tax dollars are best spent on cash payments to the wealthiest Australians. It is simply not defensible,” Mr Swan said in his speech notes.

From July 1, the baby bonus will rise to $5000, but families where the main income earner makes more than $150,000 will no longer be eligible for it.

But wait there’s more…

Tax reforms will continue to roll out over the next six years, with the Government aiming to cut the number of tax rates from four to three – cutting out the top rate of 45 per cent and leaving the scale at 15 per cent, 30 per cent and 40 per cent.

This means while high income earners may feel left out in the cold with this Budget, they are set to enjoy decent gains in coming years as their tax rates get slashed.

Someone earning over $100,000 will get an extra $20.15 a week from July 1 this year, rising to $31.73 a week from July 2009 and $41.35 a week from July 2010.

A NOTE ABOUT RELEVANT ADVERTISING: We collect information about the content (including ads) you use across this site and use it to make both advertising and content more relevant to you on our network and other sites.